Hoult v. Hoult

Full title: JENNIFER HOULT, Plaintiff, v. DAVID PARKS HOULT; ZENE ATHANS HOULT…

Court: United States District Court, D. Massachusetts

Date published: May 13, 2002

Civil Action 88-1738-DPW (D. Mass. May. 13, 2002)

Opinion

Civil Action 88-1738-DPW

May 13, 2002

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN RESPECT OF FRAUDULENT CONVEYANCES

DOUGLAS P. WOODLOCK, United States District Judge.

I. BACKGROUND

On July 27, 1988, plaintiff Jennifer Hoult ("Jennifer") commenced an action in this Court against her father, David Parks Hoult ("David"), for intentional torts, alleging that from the time she was approximately four years old until she was about sixteen years old the defendant sexually abused and threatened her. Jennifer contended she had repressed all memory of the abuse until she was twenty-four, at which time she recaptured memories during therapy sessions.

On February 8, 1993, a summary jury trial was held before Judge A. David Mazzone, at which David prevailed. Four months later, on June 11, 1993, the case was re-assigned to Judge Bruce M. Van Sickle, and a formal jury trial commenced on June 14, 1993. The case was returned to Judge Mazzone on June 30, 1993 for completion of trial, due to Judge Van Sickle's unavailability. On July 1, 1993, the jury returned a verdict for Jennifer in the amount of $500,000 plus interest. Judgment entered on July 14, 1993 in the amount of $796,876.71.

The case was thereafter re-assigned to me. I denied defendant's motion for Rule 60(b) relief after he let the appeal period pass. That order was affirmed on appeal. Hoult v. Hoult, 57 F.3d 1 (1st Cir. 1995).

On September 7, 1994, Jennifer instituted this fraudulent conveyance action by submitting a motion for leave to file a Supplemental Complaint, along with the Supplemental Complaint for Fraudulent Conveyance and Civil Contempt (#208). The motion for leave to file was granted and proceedings pursuant to the complaint have been docketed under the original civil action number. Plaintiff's supplemental complaint was subsequently amended and currently contains 16 Counts alleging, inter alia, various fraudulent transfers by her father, including real property interests, inheritance funds, bank account balances, income tax refunds, and a motor yacht.

Plaintiff claims the fraudulent transfers were conducted with the actual intent to defraud creditors, at a time when she was a creditor within the meaning of Mass. Gen. Laws ch. ch. 109A, §§ 1 and 7, and specifically that the transfers were conducted by, and/or with the assistance of, defendant's current wife, Zene Athans Hoult ("Zene") (individually and as Trustee of the various real properties at issue, and as owner of Athans Business Brokers ("ABB")), and Zene's mother, the late Grace Cuddy ("Grace")¹ in an attempt to avoid payment of the Judgment. Additionally, Jennifer alleges that certain post-judgment transfers were in violation of a Court Order dated August 4, 1993 (and later modified November 3, 1993) in which defendants David and Zene were enjoined from expending David's assets other than as necessary for ordinary living and business expenses.

1 After trial but while these findings and conclusions were under advisement, Grace cuddy died. Consequently, I hereby allow Jennifer's motion (#380) to substitute Grace's representative as a defendant in this matter.

Jennifer seeks the following relief: 1) an order for the reconveyance of real and personal property, and levy and judicial sale of real and personal property, with the proceeds to be paid to her toward satisfaction of the Judgment; 2) an order that the funds be paid to her; and 3) a Finding of Contempt by the Defendants David and Zene, with appropriate sanctions against them.

A four-day non-jury trial was held on the Fraudulent Conveyance claims. Further proceedings with respect to the issues of ordinary living expenses (Count X) and Contempt (Count XV) was deferred.

On October 7, 1997, during the pendency of the instant proceedings, David filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. in the United States Bankruptcy Court, Middle District of Florida, Tampa Division (Case No. 97-16663-8P7). That petition automatically stayed these proceedings. On December 23, 1997 Jennifer commenced an adversary proceeding in the Bankruptcy Court for a determination that her Judgment was nondischargeable, and on October 29, 1999 the Bankruptcy Court entered a final judgment against David that Jennifer's Judgment was nondischargeable under § 523(a)(6) of the Bankruptcy Code. That final Judgment was appealed, but the appeal was later dismissed for lack of prosecution.² Meanwhile, on May 1, 1998 the Bankruptcy Court granted Jennifer relief from the automatic stay to continue pursuing her fraudulent conveyance action.

2 The same was true for the finding that David's MIT pension was excluded from this Bankruptcy estate under 11 U.S.C. § 541(c)(2) and therefore was not exempt under § 522. David's appeal on this issue was also dismissed.

On May 4, 2000 the Trustee and Jennifer filed a Joint Motion to Close Chapter 7 Case and on June 15, 2000 the motion was allowed. The Bankruptcy Court ordered the Chapter 7 case be administratively closed.

II. THRESHOLD LEGAL ISSUES A. Creditor Status

At the outset, the defendants seek reconsideration of a ruling, which I adopted, by Magistrate Judge Collings, Hoult v. Hoult, 862 F. Supp. 644 (D.Mass. 1994), that Jennifer was a "creditor" within the meaning of the Massachusetts Uniform Fraudulent Conveyance Act, Mass. Gen. Laws ch. 109A, § 1 ("MUFCA"). Defendants maintain Jennifer had no standing to initiate this fraudulent conveyance action because she was not a "creditor" within the meaning of the statute at the time the action was commenced.

I decline to revise the earlier ruling in this case. I remain of the view that Jennifer, at the time her fraudulent conveyance suit was filed, was, in accordance with Mass. Gen. Laws ch. 109A, § 1, "a person having a claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent" and therefore had standing as a creditor under the MUFCA. See David v. Zilah, 325 Mass. 252, 256 (1950); Blumenthal v. Blumenthal, 303 Mass. 275, 276-7 (1939).

B. Statute of Limitations/Laches As a Bar to Pre-Judgment Transfers

The second threshold legal issue raised is the defendants' request for judgment, based on findings of fact and conclusions of law, with respect to the transfers of real property which occurred prior to September 7, 1991 (three years before the filing of the fraudulent conveyance complaint)³. I previously denied a motion for summary judgment based on the statute of limitations defense. However, by Order dated October 26, 1999, I solicited further submissions from the parties for the possible reconsideration of the issues presented, in light of In re Pilavis, 233 B.R. 1 (Bankr.D.Mass. 1999).

3 The properties in dispute are 9 Lake Road, Wayland (Count I) and 99 Silverlake Road, Bellingham (Count II).

As an alternative to the statute of limitations defenses, defendants renew their contention that Jennifer's claims are barred by the doctrine of laches. Jennifer maintains that laches does not bar her claims because she acted with due diligence in pursuing collection and discovery concerning the assets of David and Zene and that there was no inexcusable delay in filing suit. Moreover, if there was a cognizable delay, Jennifer contends that it was caused by the defendants' own concealments and misrepresentations; accordingly, she argues that because the defendants do not have "clean hands", they are estopped from asserting laches as a defense.

1. The Massachusetts Uniform Fraudulent Conveyance Act

The Massachusetts Uniform Fraudulent Conveyance Act, Mass. Gen. Laws ch. 109A, the predecessor to the Massachusetts Uniform Fraudulent Transfer Act of July 8, 1996, now in effect, does not contain a statute of limitations provision⁴. Foster v. Evans, 384 Mass. 687 (1981). As a result, the Supreme Judicial Court has held that the appropriate statute of limitations for an action under MUFCA is the statute of limitations which is "applicable to the underlying claim." Id. at 697. "Underlying claim" means "the claim which made the plaintiff a creditor in the first place." Pilavis, 233 B.R. at 9. It is the "essential nature" or "gist" of the plaintiff's claim that controls. Id. The reason for this rule is the view that these actions are "merely a remedy to the underlying claim." Id. citing Stevens Linen Associates v. Crawford (In re Stevens Linen Associates), 156 B.R. 718, 720 (Bankr.D.Mass. 1993); Desmond v. Moffie, 375 F.2d 742, 743-744 (1st Cir. 1967); see also Mi-Lor Corporation v. Robert Gottsegen, et al., (In re Mi-Lor Corporation), 233 B.R. 608, 614 (Bankr.D.Mass. 1999).

4 The Uniform Fraudulent Conveyance Act (UFCA) was repealed and replaced with the Uniform Fraudulent Transfer Act (UFTA), by the legislation of July 8, 1996 (effective October 6, 1996), 1996 Mass. Acts, ch. 157, amending Mass. Gen. Laws ch. 109A. The UFTA addresses timeliness problems of the type presented here, by expressly including its own statute of limitations. Section 10 of the Uniform Fraudulent Transfer Act provides for limitations of actions, and states:

A cause of action with respect to a fraudulent transfer or obligation under this chapter shall be extinguished unless action is brought:

(a) under paragraph (1) of subsection (a) of section five [when debtor acted with intent to hinder, delay or defraud], within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; (b) under paragraph (2) of subsection (a) of section five or subsection (a) of section six [when transfer was without reasonably equivalent value], within four years after the transfer was made or the obligation was incurred; or (c) under subsection (b) of section six [when transfer was to insider for antecedent debt], within one year after the transfer was made or the obligation was incurred.

Mass. Gen. Laws ch. 109A § 10.
It appears the instant action would be governed by the four-year limitations period provided by § 10(a), if the UFTA was applicable.

The parties are in agreement that the "essential nature" or "gist" of the claim governs the appropriate statute of limitations in this case. See Stevens Linen Associates, 156 B.R. at 720. They dispute, however, what the essential nature of the claim is in this case and consequently the appropriate statute of limitations to be adopted.

Jennifer relies on Foster, maintaining that the underlying claim is her "Judgment", and therefore the statute of limitations is a purported 20-year statute of limitations for suits on judgments. Conversely, the defendants urge rejection of Foster and rely on Pilavis, maintaining the underlying claims are the tort claims for assault and battery and intentional infliction of emotional distress, which carry a three-year statute of limitations.

Foster involved a fraudulent conveyance suit by a judgment creditor on a promissory note. The Supreme Judicial Court rejected the defendant's contention that a six-year statute of limitation was applicable, running from the date of conveyance, and held that because the underlying claim was the judgment, a 20-year statute of limitations applied. Foster, 384 Mass. at 697.

This articulation of a 20-year statute of limitations was adopted by one of my colleagues in CNF First Associates II, L.P. v. Sandra C. Dickerman, et al., Civil Action No. 97-10564-RGS (D. Mass. October 8, 1999), slip op. at 9, ("a judgment creditor should have the statutory twenty years to collect from the persons who conspire with a judgment debtor to defeat the judgment's execution").

Defendants, however, contend that Foster erroneously adopted a 20-year statute of limitations applicable to collections on judgments because there is, in fact, no such statutory 20-year limitation. Rather, the statute merely creates a rebuttable presumption that after 20 years a judgment has been satisfied. Mass. Gen. Laws ch. ch. 260, § 20. Put another way, Foster was relying on a non-existent statute of limitations.

Defendants further argue that Pilavis, a more recent case addressing the issue presented here, should control. Pilavis reasoned that Foster used the 20-year limitation period, not because judgments had a 20-year limit, but because the underlying claim was based on a promissory note, which carried a 20-year statute of limitations, Mass. Gen. Laws ch. 260 § 1.

Review of the Supreme Judicial Court's analysis in Foster does raise concerns about its internal consistency. I note that in Foster the Supreme Judicial Court expressly stated: "we apply here the period of limitation applicable to the underlying claim, in this case the twenty-year period applicable to actions on judgments." Foster, 384 Mass. at 697 (emphasis added). In drawing this ultimate conclusion, however, the Court cited as statutory authority Mass. Gen. Laws ch. 260, § 1. That section does not speak to the 20-year limitation on judgments; rather it provides a 20-year statute of limitations for actions on promissory notes. This raises the question whether the Court erroneously used the word "judgment" instead of "promissory note".

Moreover, in Foster, the Court rejected the defendant's reliance on Moseley v. Briggs Realty Co. et al., 320 Mass. 278 (1946). The defendant in Foster contended Moseley stood for the proposition that a six-year statute of limitations applied to fraudulent conveyance actions, running from the date of the conveyance. Instead, Foster interpreted Moseley to base its six-year statute of limitations on the underlying tort claim, which at that time was six years under Mass. Gen. Laws ch. 260 § 2. Thus, in determining what the underlying claim was under the facts in Foster, the Court asserted it was relying upon the entry of judgment for the plaintiff; however, in describing what the underlying claim was in Moseley, the Foster Court deemed the claim to be created by the underlying tort committed by the defendants in that case, and not the claim to recover on the judgment itself. As a result, while Foster purported to follow the Moseley rule of applying the statute of limitations for the underlying claim, it did not follow its own reasoning in reaching the ultimate conclusion regarding the appropriate statute of limitations. If the Foster holding were to be applied consistently, then it would follow that every time a plaintiff asserted a fraudulent conveyance claim in an attempt to collect on a judgment, a 20-year limitation should be applied; yet Foster accepted the six-year limitation based on the tort claim in Moseley, despite that fact that the plaintiff in Moseley was also a judgment creditor. Had the Foster court indicated that the statute of limitations was the 20-year limitation on actions on promissory notes, the holding would have been internally consistent not only with its rationale based on Moseley, but with its citation to section 1 of the statute.

I accept the defendants' position that the "gist" of Jennifer's claim was not the judgment, but the underlying tort. In doing so, I align myself to this degree with Pilavis. In Pilavis, the underlying claim was a legal malpractice action, which carried a three-year statute of limitations pursuant to Mass. Gen. Laws ch. 260, § 4. Thus, the Pilavis Court applied a three-year statute of limitations to the fraudulent conveyance action.

While Jennifer has urged adoption of her reading of Foster, as an alternative, she argues that even if I were to reject that Foster argument and were to find that the essential nature of the case was in tort (thereby invoking a three-year statute of limitations in the fraudulent conveyance case), she still is not time barred for three reasons.

First, she contends that the actual dates of the fraudulent transfers of real estate are suspect, because the dates are based on documents fabricated by the defendants.

Second, she contends that the three-year period began to run when the fraudulent conveyances were "discovered," Hendrickson v. Sears, 365 Mass. 83 (Mass. 1974), which she claims was not until on or after July, 1993 when the underlying judgment entered. The fraudulent conveyance action was commenced over a year later — but within three years of the date of discovery — and therefore is not time barred.

Third, she contends that the three-year period began to run not as of the date of the fraudulent transfer, but as of the date of the judgment, i.e., when her claim "matured." See David, 325 Mass. at 256 ("Where a conveyance is fraudulent as to a creditor, such creditor, when his claim has matured, may, as against any person except a purchaser for fair consideration without knowledge of the fraud at the time of the purchase . . .' have the conveyance set aside to the extent necessary to satisfy his claim.").

Although I do not adopt Jennifer's first or second contentions, I will necessarily make fact finding regarding them in discussing the substance of the fraudulent transfer contentions. Those findings may provide an alternative basis for resolving the statute of limitation issues, if I am in error. I ground my own determination on the proposition that, as David indicates, a cause of action on a fraudulent conveyance suit does not accrue until the plaintiff's claim has matured. David, 325 Mass. at 255. Thus, the operative date upon which Jennifer could have commenced a fraudulent conveyance suit would have been the date upon which she obtained a final judgment. Since she filed suit within three years from that date, Jennifer is not barred by the statute of limitations.

Thus, while I am of the view that Pilavis controls the issue presented with respect to determining the appropriate statute of limitations to be adopted here — the three year statute of limitations applicable to tort actions — I differ from Pilavis with respect to the date upon which the statute of limitations begins to run. Because I view the case law to indicate that Jennifer's cause of action accrued at the time her claim "matured" (i.e., the date upon which she became a judgment creditor)⁵, I find that Jennifer timely commenced her fraudulent conveyance action within the three-year time period. Accordingly, the defendants' request for Judgment on the statute of limitations issue remains unavailing.

5 The UFTA now provides a statute of limitations based on either the date the discovery of the transfer or the date the obligation was incurred. Mass. Gen. Laws ch. 109A, § 10. Treating the date of maturation as the date of obligation under § 10(a), which would be the applicable UFTA provision, see note 4 supra, it would appear plaintiff's claims would satisfy the four year statute of limitations under the UFTA as well.

2. Laches

As an alternative to the statute of limitations defense, defendants seek to avoid judgment with respect to the real property transfers, contending that the equitable doctrine of laches provides protection from Jennifer's claims with respect to the real property transactions. Defendants, citing MacGovern v. Connolly, 637 F. Supp. 111, 116 (D.Mass. 1986) and Stark v. Advanced Magnetics, Inc., 29 F.3d 1570, 1573 (1st Cir. 1994) for support, claim that plaintiff's delay in filing suit was inexcusable and has prejudiced them⁶. Defendants further contend that Jennifer knew or should have known of the transfers, inasmuch as each transfer was a matter of public record, because it was on file in the Registry of Deeds.⁷

6 Defendants claim the prejudice stems from the fact that had Plaintiff challenged the transactions earlier pursuant to Mass. Gen. Laws ch. 109A, § 10, Defendant Zene Hoult would not have made subsequent purchases. I reject this argument as inconsistent with Defendants' principal contention that Zene's undertaking to purchase rental properties was in accordance with her retirement plan and that David had no participation in it. Moreover, as of 1988 David and Zene plainly knew of Jennifer's abuse claims, and this did not prevent them from making subsequent purchases of real estate. The assertion of prejudice is fundamentally inconsistent with their position that they never believed Jennifer would prevail in a lawsuit again David, and that consequently they essentially ignored the litigation.

7 At the hearing in December 1999, Defendants conceded, however, that the amendments to the Schedule of Beneficial Interest in the Trusts would not have been a matter of public record in the Registry of Deeds.

Having found that Jennifer's suit was timely filed, I reject the defendants' request for Judgment with respect to the property transfers based on the doctrine of laches. Moreover, for the reasons more fully set forth below, the defendants' own wrongful actions must be taken into consideration when weighing the equities involved. As will become apparent, I find that although not actionable as fraud with respect to the real property transactions, the defendants David and Zene Hoult engaged in what can only be characterized as a systematic pattern of misrepresentations and fraudulent transfers and concealments of various other assets, designed to obstruct Jennifer's collection attempts. Thus, if I were to reach the issue of equitable considerations, I would find the defendants estopped from asserting a laches defense.

III. FINDINGS OF FACT AND CONCLUSIONS OF LAW IN RESPECT OF FRAUDULENT CONVEYANCES A. Fraudulent Conveyances: Actual Intent to Defraud

Upon a determination that there has been a fraudulent conveyance, the Court may enter an order avoiding the transfer, or part of the transfer, as may be necessary to prevent injustice. Mass. Gen. Laws ch. 109A, § 9. In order to establish a fraudulent conveyance under Mass. Gen. Laws ch. 109A, § 7, the theory under which Jennifer is proceeding before me, a creditor must prove first, that a conveyance has been made, and second, that it was made with actual intent to hinder, delay, or defraud the creditor in collection attempts⁸. Jorden v. Ball, 357 Mass. 468, 470 (1970). Proof of an "actual intent" to defraud must be made by clear and convincing evidence. In re the O'Day Corp., 126 B.R. 370, 410 (Bankr.D.Mass. 1991). "Actual intent" may be found, of course, from the supportable inferences after considering the totality of the circumstances. Other factors which may be considered are whether there was fair consideration given in connection with a transaction, and whether the transaction was made after litigation was commenced or judgment entered against the debtor-transferor. See generally Citizens Bank Trust Co. v. Rockingham Trailer Sales, Inc., 351 Mass. 457 (1966), reaffirmed Citizens Bank Trust Co. v. Rockingham Trailer Sales, Inc., 353 Mass. 777 (1968); Virta v. Mackey, 343 Mass. 286, 290 (1961); Murray v. Bateman, 315 Mass. 113 (1943); McCarthy v. Griffin, 299 Mass. 309 (1938); In Re Roberts, 81 B.R. 354, 365 (W.D.Pa. 1987).

8 Massachusetts General Laws ch. 109A, § 7, stated:

Every conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, is fraudulent as to both present and future creditors.

Id.

With respect to claims against Zene and Grace, the defendants who have allegedly conspired with David and/or received the fraudulently conveyed property, Jennifer must show that they accepted the transfers of assets with knowledge of David's fraudulent intent. As the Massachusetts Appeals Court noted:

Where a transferee knowingly participates in a fraudulent conveyance, judgment properly may be entered holding the transferee personally liable to a defrauded creditor, at least to the extent of the value of property or proceeds remaining in the transferee's possession. Northborough Natl. Bank v. Risley, 384 Mass. 348, 424 N.E.2d 522 (1981). Such a judgment, as distinct from a judgment allowing only levy and execution on or attachment of the fraudulently conveyed property, itself (see Mass. Gen. Laws ch. 109A, § 9), is based upon an unjust enrichment theory.

Richman v. Leiser, 18 Mass. App. Ct. 308, 316 n. 6 (1984).

B. Transfers of Real Property to Trusts and Refinancing of Real Property: Counts I, II, III and IV.

In Counts I-III of Plaintiff's Complaint, Jennifer alleges that David and Zene conducted transactions which resulted in fraudulent transfers of three pieces of rental property. Specifically, Jennifer claims that David and Zene transferred properties which they held as tenants by the entirety into separate nominee Trusts. Pursuant to this scheme, Jennifer alleges David relinquished his 50% interest (as a tenant by the entirety) in favor of a 5% beneficial interest in the Trust, while Zene took a 95% interest in the Trust. Jennifer contends the net result is that David fraudulently transferred a total of 45% of his interest in each of the three properties. Jennifer seeks to have Zene re-convey 45% of the beneficial interest in the three pieces of property to David, and to have this Court order the levy and judicial sale of each property, with 50% of the proceeds to be paid to Jennifer toward satisfaction of the judgment.

In Count IV, Jennifer claims, with respect to a fourth piece of property that was not actually purchased, David fraudulently transferred $31,454, which represented his 50% interest in proceeds received upon the refinancing of the marital residence and which Zene intended to use for the acquisition of that property. Jennifer seeks a judgment against David and Zene in the amount of $31,454.

At the core of the counts with respect to the real property is the question whether Jennifer has proven by clear and convincing evidence that David and Zene acted with fraudulent intent at the time of each conveyance related to the real property.

In order to assess Jennifer's claims with respect to the alleged fraudulent transfers in connection with real property, and David's assertion that he did not contribute capital to the purchases and therefore had no real interest to convey in the transfer, it is first necessary to recount the pre-judgment chronology with respect to the acquisition by Zene and David of interests in various other pieces of real property which are not themselves the subject of any claim in this litigation.

1. Acquisition of real properties not subject to Plaintiff's Supplemental Complaint.

a. 47 East Main Street, Marlboro

In 1985, prior to Zene's marriage to David, both David and Zene met with David's attorney, David Kertzman, to discuss a plan that Zene had to acquire about five rental properties. Zene, who had business experience which included buying and selling properties, decided to acquire properties after her divorce from her first husband, Michael Athans, as part of a retirement plan. Zene decided to acquire about five single family residences for use as rental properties because she was no longer a beneficiary of her former husband Michael's pension or retirement plans, and because her grandmother had previously owned five pieces of rental properties and Zene felt that was what she needed to generate sufficient retirement income.

Attorney Kertzman advised her that title to each property should be held in a separate nominee trust, because holding the properties in that form would protect the property of one trust against the creditors of a different trust. He also advised her that she could not be both the sole trustee and the sole beneficiary of a trust.

Shortly after the meeting, Zene purchased her first piece of real property for $94,000 pursuant to the plan. This was a single family residence located at 47 East Main Street in Marlboro. Zene co-brokered the deal and she contributed her co-broker commission of $2,820 toward the purchase. She also paid $20,000 as a downpayment, and financed the balance of the purchase by two loans; one from the Bank of Boston and one from her co-broker, John Nelson Realty. Zene was the sole signatory on the loans. Attorney Kertzman prepared a Declaration of Trust, and title was taken in the name of East Main Realty Trust. The Declaration of Trust identified Zene as the Trustee, and her mother, Grace Cuddy, as the sole beneficiary.

After purchasing the property, Zene opened an Investment account at the Middlesex Savings Bank in the name of the Trust. Zene used this account to deposit tenant security checks, last month's rent, and rental checks for all her pieces of rental properties. She also used this account to make payments for taxes, repairs, mortgages, and improvements.

On April 12, 1986, a month prior to David and Zene's marriage, the East Main Street Realty Trust was amended, and Grace Cuddy was deleted as the sole beneficiary and Zene and David were substituted as beneficiaries, with each holding a 50% interest in the Trust. This amendment was prepared by Attorney Kertzman at David and Zene's request, and was recorded in the Registry of Deeds.

On April 14, 1986, David executed an Indemnification Agreement concerning the property, which was also prepared by Attorney Kertzman, in which David agreed to be liable on the two mortgages secured by the property. The Indemnification Agreement stated, in part:

Whereas David P. Hoult desires to be named as a 50% beneficiary of the East Main Street Realty Trust, which entity holds title to the premises 47 East Main Street, Marlboro, Massachusetts, . . .

Now therefore, in consideration of designation of David P. Hoult as a beneficiary under said realty trust, the said DAVID P. HOULT hereby covenants and agrees, notwithstanding the fact that he neither executed nor guaranteed either of the above promissory notes, that he will be jointly and severally liable and responsible with Zene C. ATHANS relative to payment obligations contained in said promissory notes, as if he had been an original signatory thereunder.

Several weeks later, on May 10, 1986, David and Zene were married. Zene and David entered into an agreement in which David agreed to assume liability on the mortgages and pay approximately $16,000 toward the discharge of the Nelson mortgage in exchange for which David became a 50% beneficiary of the Trust. Shortly thereafter, David and Zene paid off the second mortgage, the John Nelson Realty mortgage. David contributed $16,340.14 toward the payoff of the mortgage.

While David did not contribute precisely 50% of the equity, (Zene contributed about $23,000 in comparison with David's approximately $16,000) he nonetheless held a 50% interest in the property as a result of his contribution to paying off the John Nelson mortgage and his agreement to be liable on the mortgages.

The 47 East Main Street property is not, of course, a subject of Jennifer's Supplemental fraudulent conveyance Complaint. Nevertheless, David and Zene's intent with respect to the amount of David's interest in property is relevant to the conclusions to be drawn with respect to the other pieces of properties which are subject to the Complaint. I find that when David and Zene chose to make David an equal beneficiary he actually made a significant — if not precisely equal — capital contribution in addition to obligating himself on mortgage loans as a co-signatory.

b. 9 Heard Road, Wayland

Apart from the 47 East Main Street property, Zene owned another piece of real property which is not the subject of Jennifer's Supplemental Complaint. This is David and Zene's marital residence located at 9 Heard Road in Wayland, which is also Zene's place of business.

The property at 9 Heard Road was initially purchased by Zene and her former husband, Michael Athans, in 1977. At the time of purchase, Zene needed $20,000 in order to obtain the property, and, since the residence had an in-law apartment attached to it, Zene and Michael, and Zene's parents, Grace and Ralph Cuddy, agreed that in consideration for a $20,000 loan from them, Grace and Ralph Cuddy would be allowed to reside in the in-law apartment for their lifetimes. The concern at that time was that Ralph, who had suffered a stroke and required individual care and attention, not be forced into a nursing home.

In 1982 Zene and Michael Athans were divorced. Pursuant to a Separation Agreement and Judgment, Zene obtained title to 9 Heard Road.

In 1986, in anticipation of their marriage, David and Zene discussed the proposition that Zene's parents could live at the property for life, and David understood the agreement to be a condition of the marriage.

On February 3, 1987, David and Zene submitted a joint application to the West Newton Savings Bank to refinance the property. The purpose of the refinancing was to obtain additional funds for Zene to invest in a second piece of rental property pursuant to her investment/retirement plan, and also to remodel the marital residence. Zene had approximately $290,000 in equity in the residence. In May 1987, David and Zene refinanced the residence. A mortgage in the amount of $150,000 was approved. David and Zene were jointly liable on the mortgage note. David received a 25% interest in the property as a result of the transaction.

The Quitclaim Deed provides, through a handwritten modification of the document, that title was taken as "tenants in common," with David and Zene's interest being 25% and 75% respectively. This handwritten modification was made by the bank's attorney, Charles Holly, at the closing. At that time, the prepared documentation for the property indicated the property was set to be taken jointly by David and Zene as tenants by the entirety. However, at Zene's request, Attorney Holly struck out the words "tenants by the entirety" and replaced them with "tenants in common," indicating the percentages of respective interest for David and Zene. The bank did not require that David and Zene take title to the property as tenants by the entirety, so long as they were both jointly liable on the mortgage note. Zene requested the modification in the deed because she thought that David should not be entitled to a 50% interest in the property when he was not making any cash contributions, but was only agreeing to be obligated on the $150,000 mortgage. David, by contrast, felt that because he was obligated on the note, and because he also agreed to pay one half of the household expenses, including the mortgage, he should be a 50% owner of the house. Zene and David then agreed that she would convey to David a 25%, not a 50%, interest in the property, if David would agree that the first $290,000 in equity would be paid to Zene solely, before David took any proceeds from any future sale of the home. David agreed to this arrangement.⁹

9 Thereafter, the equity in the marital residence was used, in part, to purchase the other properties which are the subject to Jennifer's complaint.

I find the 9 Heard Road transaction relevant to demonstrate that prior to the underlying litigation thereafter commenced by Jennifer, David and Zene negotiated respective interests in property based upon David's contribution apart from liability on the mortgage notes.

2. Transfer of real property subject to Plaintiff's Supplemental Complaint

a. Count I: 9 Lake Road, Wayland

In June 1987, Zene located a second piece of property, which she wished to purchase pursuant to her investment/retirement plan. This property was a single family residence located at 9 Lake Road in Wayland. Zene attempted to obtain a mortgage from the West Newton Savings Bank, with the intent to take title to the property in the name of a trust, as she had done with the East Main Street property. However, the West Newton Savings Bank denied her application to take title in the name of a trust, or to obtain a mortgage only in her name. The Bank was reluctant to lend to individuals who wanted to take title to residential properties (as opposed to commercial properties) in the name of a realty trust.

As a result of the Bank's denial of the mortgage, Zene consulted Attorney Kertzman about this problem, and at that time, he advised her that if she and David purchased the property in their individual names, they could later convey it to a realty trust, although each would still be held liable on the mortgage. Attorney Kertzman suggested that David and Zene wait one year before making such a conveyance.

As a result of her conversations with Attorney Kertzman, Zene felt she had to proceed in that manner (i.e. transfer to a trust at a later point), in order to acquire the property. Zene executed a purchase and sale agreement for 9 Lake Road. The purchase price was approximately $165,000, however, Zene co-brokered the transaction, and therefore it was agreed that rather than apply her commission toward the purchase price, the other co-broker would charge only a 3% commission, thereby reducing the asking price to $160,000. Zene made a deposit on the purchase and sale agreement.

Zene and David submitted a mortgage application with the West Newton Savings Bank. On July 31, 1987, Zene and David obtained a mortgage from that Bank in the amount of $100,000, and they took title to 9 Lake Road as tenants by the entirety. At all relevant times after the purchase, Zene managed the rental property at 9 Lake Road without any significant involvement by David in the business. Zene located the tenants, prepared leases, collected the rents, and arranged for repairs and paid for expenses in connection with the property. David's name did appear on some of the leases for this and other property because Zene did not know some of the tenants and, for her protection, wanted there to be a man's name on the lease.

Sometime after buying the property, Zene asked Attorney Kertzman to prepare a deed and a realty trust for the property. Zene and David agreed that because Zene was going to do all the management of the properties, because David did not contribute to the purchase of the property, and, because the funds came from Zene's equity in 9 Heard Road, that David should have no interest in the property.

However, Attorney Kertzman advised Zene that she could not be the sole trustee and the sole beneficiary of a trust. It was then agreed that David would retain a 5% interest in the trust. A realty trust was established through a Declaration of Trust; a Schedule of Beneficiaries was created, and a new deed was prepared. The Schedule of Beneficiaries lists David as having a 5% beneficial interest in the trust, and Zene a 95% beneficial interest.

Attorney Kertzman did not prepare the Schedule of Beneficiaries and did not recall it being executed or witnessed before him. He did not recall whether he gave David and Zene a blank form of Schedule, nor did he recall seeing the Schedule prior to his deposition taken in this litigation. He also did not recognize the document as one generated from his computer, and noted that the signature line did not look familiar to him as the type that would have been printed from one of his systems. The Schedule of Beneficiaries did not bear any witness signatures, nor was it recorded.

I have carefully considered Jennifer's contention that the schedule of Beneficiaries constitutes a recent fabrication, and do not find it persuasive. I find it more likely that David had the form, which he obtained previously from Attorney Kertzman, on his computer, and that, at the time of the creation of each of the trusts, he merely made the necessary alterations and re-printed the form for each subsequent trust transfer. This would account for the fact that the same typographical errors appear on each subsequent Schedule of Beneficiaries.

I have considered that the transfer to the trust occurred contemporaneously with David's receipt of notice of Jennifer's underlying lawsuit, and the fact that David and Zene expressly inquired of Attorney Kertzman regarding protection of assets.

I find, however, that David and Zene never intended for David to be an equal — or indeed even a significant — partner in Zene's rental purchase retirement business plan absent an equal or significant capital contribution of his own. The testimony of Attorney Kertzman, which I credit, corroborates much of David and Zene's testimony with respect to the transfer of rental properties into various realty trusts. Attorney Kertzman testified that, even prior to Jennifer's lawsuit, the practice of putting the rental properties into trusts was developed upon his legal advice; that he advised Zene to wait one year before putting the rental properties into trusts; and that he understood that Zene's investment/retirement plan was for her benefit alone, done with her money, and there was not an agreement that David would share in the plan as an equal partner. The use of individual ownership, with the intent later to transfer to a realty trust, was a mechanism designed to deal with the inability of Zene to use a realty trust at the outset.

I reject Jennifer's contention that the 9 Lake Wood property was transferred into the realty trust in August 1988 because David was aware of the recently filed lawsuit. The timing appears coincidental with the filing of Jennifer's lawsuit, rather than because of it. The suit was commenced on July 27, 1988. David and Zene had purchased 9 Lake Wood Drive on or about July 31, 1987. Attorney Kertzman advised Zene and David to wait one year before establishing a trust. The one year waiting period would have expired July 31, 1988 (four days after Jennifer's lawsuit was commenced). The trust was established immediately thereafter. I do not find significant Jennifer's claim that David and Zene had done nothing with respect to the property and had not contacted Attorney Kertzman about preparing the trust, until the lawsuit was filed, because there would have been no need for any action or contact until the one year waiting period had expired.

I conclude that Jennifer has not proven by clear and convincing evidence that the conveyance of 9 Lake Road, pursuant to the trust schedule of beneficiaries, was a fraudulent transfer of any of David's interest in the property.

b. Count II: 99 Silverlake Road, Bellingham

In May 1989, after David and Zene were put on notice of Jennifer's lawsuit, Zene located a third piece of rental property which she planned to acquire pursuant to her investment/retirement plan. This was a single-family residence located at 99 Silverlake Road in Bellingham.

Zene made inquiry of the Dedham Cooperative Bank with respect to obtaining a mortgage to purchase the property. However, the bank would not permit her to obtain a loan in her name alone or in the name of a realty trust. David again agreed to co-sign the mortgage note, in consideration for Zene giving him a 5% beneficial interest, as had been done with the 9 Lake Road property.

Prior to the closing, Zene asked her mother Grace, to advance her $40,000 toward the purchase price. On May 31, 1989, a $20,000 "advice of debit" issued by BayBank, and on June 20, 1989 another $20,000 "advice of debit" issued from Grace's account. I note that no cancelled checks were produced to confirm payment of this amount to Zene but nevertheless find the transactions were for the anticipated advance.

Zene testified that she expected to repay Grace upon the future sale of the property. Zene then negotiated the purchase price directly with the owners, thereby reducing the 6% standard broker's commission. The purchase price was $142,500 plus closing costs.

On April 30, 1989, Zene paid a deposit to the Sellers with a $1000 check from the East Main Street Realty Trust. On May 18, 1989, Zene paid a $6500 downpayment with a check from the Middlesex Savings Bank, and on June 22, 1989, Zene paid $10,000 in ten $1000 money orders from BayBank.

On June 23, 1989, David and Zene executed a mortgage note, obtained an $85,000 mortgage from Dedham Cooperative Bank, and took title, as tenants by the entirety, to 99 Silverlake Road. One day prior, on June 22, 1989, David wrote a check for $31,164 on the East Main Street Investment Account, in order to obtain a certified check for the next day's closing. I find that although David physically wrote out the check, the funds comprised monies of Zene and her mother Grace, and were not David's funds, as Jennifer claims. After the purchase, Zene was responsible for the management of the property, including locating the tenants, preparing the leases, making repairs, collecting rents, and paying expenses associated with the property. David made no contributions to the purchase price or for use, maintenance, debt, taxes, upkeep or improvements.

On July 12, 1990, approximately one year after the purchase of 99 Silver Lake Road, the property was deeded to Zene as trustee of the 99 Silverlake Realty Trust, a trust which was created pursuant to a Declaration of Trust prepared by Attorney Kertzman. The Schedule of Beneficiaries, which indicates execution by David and Zene the same day, gave David a 5% beneficial interest, and Zene a 95% beneficial interest.

Attorney Kertzman testified that he had prepared the Declaration of Trust on 99 Silverlake Road, under terms similar to those of the 9 Lake Realty Trust, and that:

[T]he advice I provided to Zene was predicated on the fact that David and Zene's expressed intent was to keep their individual assets separate and avoid commingling as much as possible.

I find that as with the 9 Lake Road property, Zene did not intend to give David a gift of one-half of the property because he did not contribute any funds to the purchase price, and because she was going to manage the property herself.

I recognize that on August 10, 1988, David withdrew $29,957.99 from his investment account at Merrill-Lynch. That money then went into David's Middlesex account. Thereafter, beginning on August 17, 1988 through October 15, 1988, David made a number of withdrawals from his Middlesex account, in the amount of $2500 apiece. David withdrew $2500 on August 18, August 19, August 20, August 22, August 23, September 19 and October 15, for a total of $20,000, all checks made out to cash.

David claimed that those funds ultimately went to Attorney Kane for legal fees. However, Attorney Kane was paid from David's capital account on August 17, 1988, in two checks in the amount of $25,000 and $5000 and also from other accounts.

Jennifer claims that since David already paid his lawyer $30,000 from another account, the $20,000 of funds that he transferred into his Middlesex account from his Merrill-Lynch account is suspect. His later withdrawal of checks on a "cash basis" was done, she contends, as an attempt to make it difficult for Jennifer to trace David's contribution to Zene for the property at 99 Silverlake Road. Further, Jennifer claims Zene's testimony regarding the source of part of the downpayment is not credible and that she must have gotten the money for the downpayment on 99 Silverlake Road from David, despite Zene's claim she used her own funds (the ten money orders of $1000 each) and the $40,000 loan from her mother.

I have considered the withdrawals made by David from various of David's accounts as well as Zene's banking transactions during the late summer and fall of 1988. Despite conflicts in testimony and the odd banking practices they reflect, I cannot find they evidence a fraudulent transfer with respect to the 99 Silverlake Road property. There is an insufficient nexus linking David's withdrawal of $20,000 from August through October 1988, to the purchase of the property, which took place more than nine months later, on June 23, 1989. While those withdrawals may have been with fraudulent intent to conceal those funds, it does not follow that the intent was to contribute to the purchase price of Zene's real estate. I find that Jennifer has failed to prove the $20,000 withdrawal by David constituted a capital contribution to the purchase price of 99 Silverlake Road.

I conclude that Jennifer has failed to prove by clear and convincing evidence that the conveyance of 99 Silverlake Road, pursuant to the trust schedule of beneficiaries, was a fraudulent transfer of any of David's interest in the property.

c. Count III: 45 LaSalle Avenue, Framingham

In 1991, Zene began searching for a fourth piece of rental property. Zene's search consisted of looking at foreclosed properties. In advance of her anticipated purchase, Zene again sought to refinance the marital residence at 9 Heard Road, in order to take advantage of favorable interest rates, and to obtain more money to use for the purchase.

On September 12, 1991, David and Zene refinanced 9 Heard Road, and obtained a mortgage loan in the amount of $186,400 from BancBoston Mortgage Corporation, with an interest rate of 9.25%. Of that money, $150,000 was used to pay off the existing mortgage at 10.75%. The remaining monies were used to pay off an equity line of credit at BayBank Middlesex.

In early 1992, Zene located 45 LaSalle Avenue in Framingham, which she sought to purchase pursuant to her investment/ retirement plan. The purchase price was $146,875.00. The bank would not allow her to take title in the name of a realty trust, or to obtain a loan solely in her name. Thereafter, Zene submitted a mortgage application in the name of Zene and her mother Grace. Zene also asked her mother to advance her money for the purchase, and Grace loaned her $22,000, which Zene planned to return upon a future sale of the property, along with a share of any net gain.

Zene paid $22,000 as a deposit. However, she was unable to get the bank to approve a mortgage to her and Grace, so she prepared a new mortgage application¹⁰, and signed David's name pursuant to a power of attorney given to her.

10 Jennifer claims David lied on the mortgage application that he was not a party to any lawsuit at that time. However, Zene filled out the application on his behalf. This fact is relevant as it relates to Zene's credibility in general, and may also raise issues with respect to possible fraud upon the lender. I do not, however, consider it material to the findings with respect to the real estate transfers.

On April 29, 1992, the bank approved the mortgage and loaned Zene and David $110,000. Zene held the power of attorney and David did not attend the closing. The property was taken by David and Zene as tenants by the entirety. Zene did not intend to give David a 50% interest in the property. David took a 5% interest, as he had with respect to the prior rental properties. Zene intended to wait a period of time, and then place the property in a realty trust, as she had done previously, in accordance with the advice of Attorney Kertzman.

After Zene acquired the property, she obtained tenants, prepared leases, and managed the property, including responding to tenant complaints, making improvements and repairs, collecting rents, and paying expenses.

On January 14, 1993, Zene and David executed a deed conveying 45 LaSalle Avenue to the LaSalle Realty Trust, under a Declaration of Trust. The documents were again prepared by Attorney Kertzman, although he did not generate the Schedule of Beneficiaries form. Again, according to the Schedule of Beneficiaries, David took a 5% interest and Zene a 95% interest in the trust. David did not contribute to the purchase price.

For the same reasons discussed in connection with the 9 Lake Road property and the 99 Silverlake Road property, I find that Jennifer has failed to prove by clear and convincing evidence that the conveyance of 45 LaSalle Avenue, pursuant to the trust schedule of the beneficiaries, was a fraudulent transfer of any of David's interest in the property.

d. Count IV: 18 Salmi Road, Framingham

In late 1992, Zene began searching for a fifth piece of rental property pursuant to her investment/retirement plan. She once again sought to refinance the mortgage on the 9 Heard Road property in order to bid on properties at foreclosure sales where certified checks were required. In the course of searching for rental properties, she would attend foreclosure sales, and these sales would typically require bank checks. Her practice was to obtain bank checks in even denominations in order to tender a bid on foreclosed properties. Zene had purchased the 45 LaSalle Street property in this fashion.

On December 16, 1992, Zene and David obtained a $250,000 mortgage from the Middlesex Savings Bank, at an interest rate of 6.25%, lower than the existing mortgage. Zene used part of those funds to discharge the existing mortgage of $186,400, and she held the balance of over $62,000.00 in an account at the Sterling Bank.

In the spring of 1993, before the jury trial in this matter — but after the summary jury trial in which David prevailed — Zene located the rental property at 18 Salmi Road in Framingham, MA. She made a deposit of $13,500 and applied for a mortgage from the Middlesex Savings Bank in Natick, MA. However, after entry of judgment for Jennifer against David in the underlying action, Zene decided not to proceed with the purchase of the property, and forfeited her $13,500 deposit.

Jennifer claims that David endorsed a check to Grace in the amount of $62,409.48, which was payable to David and Zene from Zaltus Medoff and Radar-Trustees. This money represented the net proceeds received upon the refinancing of 9 Heard Road, after discharge of the existing mortgage for which both he and Zene were co-borrowers. The check was then deposited in a bank account for Zene and Grace. Zene withdrew $15,000 from the account on the same day, and deposited $15,000 in another account on March 17, 1993. On April 13, 1993, $2000 was withdrawn, and another $2000 on May 13, 1993.

On January 31, 1994, $44,786.31 was withdrawn in 9 checks to Zene; 8 checks were for $5000 apiece, and 1 check was for $4000. Two of the $5000 checks were endorsed to Grace, and 7 of the checks were deposited in accounts for Zene and Grace, or were cashed.

Jennifer claims that David had a 50% interest in the amount of the net proceeds of the refinancing of 9 Heard Road ($31,454), since he was a co-obligor on the mortgage. I have found David possessed only a 25% ownership interest in 9 Heard Road, so the most he could be expected to lay claim to would be 25% of the $62,000 and then only after equity of over $290,000 was established. The fact that he was jointly liable on the mortgage would not confer additional equity rights to him. Regardless of this method of calculation, I find, in any event, that David had no interest in the refinancing proceeds. While the paper trail of banking practices raises suspicions, I find that the refinancing proceeds belonged solely to Zene, and thus the transfer to Grace and the subsequent deposits and withdrawals do not constitute a fraudulent conveyance of David's assets. Even if David, Zene, and Grace all had an actual intent to conceal this money from Jennifer — as I find likely — there remains the requirement that the alienated assets belong to the debtor, David. Here, I find they did not. I base my finding on David and Zene's agreement that the first $290,000 of equity in the 9 Heard Road property belonged to Zene.

I conclude that Jennifer has not proven by clear and convincing evidence that any monies generated in the December 1992 refinancing of 9 Heard Road involved a fraudulent conveyance of David's assets.¹¹

11 Given my findings with respect to the real estate transfers, I need not address in detail the various other defenses interposed by David and Zene. I note, however, that their diminution defense, i.e., the contention that even if there was fraud, Jennifer cannot prove the alienation of property resulted in a reduction of assets which might have been used to satisfy the Judgment, is, at the very least, disingenuous, especially in light of the bankruptcy proceedings and in view of the fact that David has not yet satisfied the Judgment.
I have also rejected Zene's defense that the claims against her are barred because she was not sued in her capacity as Trustee. I have allowed Jennifer's Motion to Amend the Complaint to correct what I deem to be merely a technical defense.

C. Transfers of Inheritance Distributions: Counts V, XIV, VI

In Counts V, XIV and VI, Jennifer alleges that as a result of the July 1, 1993 return of the jury verdict in her favor, David made three fraudulent transfers of inheritance funds which he received from a Trust established by his aunt, Martha Hoult, and from a Trust of his cousin, Warren Jacks Hoult (the Monroe Avenue Trust).

The first distribution of $25,000 (Count V) was made in late June 1993. David transferred this check to Zene, who deposited it in her business account. Thereafter, Zene wrote a check in that amount back to David, who then transferred it to Zene's mother, Grace Cuddy. The funds ultimately wound up in a joint account for Grace and Zene.

The second distribution of $52,691.52 (Count XIV) was made, at David's direction, directly to David's brother Charles, in the fall of 1993.

The third distribution of $8,916.93 (Count VI) was made to David in mid-November 1993 and transferred to Zene.

1. Count V: Transfer of $25,000.00

In 1971, a Trust was established by Martha Hoult (the "Martha Hoult Trust"), which was funded with various assets, including real estate. Upon Martha Hoult's death in the mid 1970s, the Trust was divided in four equal shares, with one quarter to David, one quarter to David's brother Charles (through a spendthrift trust (the "Charles Trust") to be administered by the Edgar County Bank and Trust (the "Bank")), one quarter to his sister Maude Hoult Loral, and one quarter to his cousin, Warren Jacks Hoult (through a trust (the "Warren Jacks Trust") also administered by the Bank)). The Martha Hoult Trust further provided that if Warren Jacks Hoult died without heirs, the assets of the Warren Jacks Trust would be distributed in equal shares to David, Charles and Maude. In 1991, Warren Jacks Hoult died, leaving no heirs, and thus the trust assets passed to David and his siblings. However, because part of those assets included real estate (farmland), the property needed to be liquidated for ease of distribution of the assets from the Warren Jacks Hoult Trust to David, Charles, and Maude. In this connection, the Bank needed Court approval for any sale.

On April 21, 1993, the Bank's counsel, James Caleb Stanfield, wrote to David, and his siblings Charles and Maude, to advise them of a "Petition for Instructions" filed in the Edgar County Court in Illinois, seeking Court approval to sell certain trust assets, including farmland, and to make distributions of the proceeds to them, in connection with the Trust. A copy of the Petition and the Trust Agreement was attached to the Bank's letter to David.

On June 15, 1993, shortly before the jury returned its verdict for Jennifer in her underlying action against David, the Bank's vice president and trust officer, William B. Dennis, wrote to David, Maude, and Charles, to inform them that the Petition had been approved, and that they would all receive a distribution from the Warren Jacks Trust within a few weeks. The Bank further advised that it expected an "early fall sale of the 80-acre farmland", with distribution of the net proceeds and the final winding up of the trust affairs. In response to this letter, on June 16, 1993, David instructed Attorney Stanfield to send his share of the distribution of Martha's Trust to Athans Business Brokers Escrow Account (ABB), care of Zene Athans. Attorney Stanfield, in accordance with David's instructions, sent a letter to the Bank entitled "Directive". This document directed the Bank to send the partial distribution, as David requested, care of Zene Athans. However, because David's letter did not use the word "assign", Attorney Stanfield suggested to the Bank that the check be made payable to David directly.

As a result of this "Directive" from Attorney Stanfield, the Bank issued a check on or about June 29, 1993, in the amount of $25,000.00, payable to David P. Hoult, but directed to Athens Business Brokers c/o Zene Athans. Upon receipt of the check, David endorsed it to Zene. Zene then deposited the check in the ABB account, where it stayed until after judgment entered for Jennifer in the original action, on July 23, 1993.

After that date, Zene wrote David a check out of the ABB account, in the amount of $25,000.00, which David endorsed, and then gave to Zene's mother, Grace Cuddy. Grace deposited the money herself in a bank account in the names of Grace and Zene. Grace Cuddy was aware during this time period that Jennifer was trying to enforce a judgment against David, and in fact, Grace had helped Zene hire lawyers in connection with the lawsuit. At the fraudulent conveyance trial, Grace did not claim an ownership interest in the $25,000.00 check, she testified she was merely holding the money for David. The funds are currently held in an escrow account pursuant to a Stipulation.

I recognize that following the trial, Grace and Zene have taken a contrary position with respect to the funds. They now claim that Grace indeed has a proprietary interest in the $25,000.00, and it is their position that the subsequent conveyance by David to Grace was done to protect Grace's interests, as a creditor of David, based upon the use of her funds to acquire properties in which David held title in his name. Grace and Zene concede that such a transaction may have constituted a preference of one creditor over another, but they deny that the transfer was fraudulent. Grace now claims she is entitled to a set-off against the $42,000.00 used to acquire the properties in which David has an interest.

By contrast, David's position with respect to the money is quite different. David testified that the $25,000.00 distribution really belonged to his brother Charles, pursuant to a prior agreement he had made with him. David stated he received a phone call from his brother, in which Charles reminded him that there was a prior agreement (that David would give Charles proceeds from any distribution, in exchange for some farmland). In his prior Affidavit however, David indicated that he was the one who initiated the conversation with his brother Charles, when David had learned that the funds would be available. In any event, David claimed that the reason he gave Zene the funds to deposit in her ABB account was that, since it was his brother's money, he "didn't know how to deal with it." He also stated that he later gave Grace the $25,000.00 check that Zene had given him, for "safekeeping." At another time, as an alternative explanation offered by David regarding why he gave the money to Zene was that his brother Charles had agreed to loan David the money to help David pay his legal fees. David later asserted that the funds should have been paid directly to Charles, and that the money is still owed to Charles.

For her part, Zene initially asserted that David told her the money belonged to Charles but that Charles was making the funds available to pay David's legal fees. This prior position is, of course, contrary to her current position that the money was meant to protect Grace as a creditor with respect to the real estate purchases. No written documentation has been produced to evidence a $25,000.00 loan by Charles, or any terms of such a loan.

I find that during the discovery phase of this litigation and following the $25,000.00 distribution, David knowingly gave intentionally misleading testimony on August 10, 1993, that he was not an heir in anyone's Will between 1974 and 1993. He was at that time, in fact, a beneficiary of the Martha Hoult and Warren Jacks Hoult Trusts. In his deposition in August 1993, David denied any knowledge that he was a beneficiary, yet, at trial, he testified that he knew in the spring of 1993 that there was going to be a distribution of an inheritance to him. David denied however, that he had any knowledge of the trust terms. The letter from the Bank evidences that David clearly had knowledge of the existence of the Trusts, the Trust terms, and the Petition for Instructions for sale of the real estate. David's instructions to Attorney Stanfield evidence that he knew he was a beneficiary at least as of June 1993, less than 2 months prior to his deposition.

Finally, with respect to Zene's actions in connection with this distribution, as stated previously, Zene at one point admitted that she thought the $25,000.00 belonged to Charles. However, on January 14, 1994, when Zene was deposed and questioned about David's inheritance, she denied having any knowledge of this. Specifically, she was asked whether she was aware that certain land was left to David by a Jack Hoult in August 1993, to which she responded she was not. When asked whether she knew who Jack Hoult was, Zene also denied knowing anything about Jack Hoult. Yet, in June 1993, six months prior to her deposition, David had endorsed to Zene, the $25,000.00 check from the Bank. This check, on its face, references the Monroe Ave-Warren Jacks Hoult trust. Additionally, Zene had received another distribution check only 2 months prior to her deposition (the $8,916.93 check which is the subject of Count VI), which also expressly referenced the trust.

At a deposition of Zene taken in September 1994, Zene produced a copy of a $25,000.00 check from Zene's ABB escrow account, which she wrote to David, to return to him the money he had previously given her from the first inheritance distribution of $25,000.00. At that time, Zene testified the check description was "deposit returned, dry cleaners." The check itself appears to state "deposit returned, cleaners."

Significantly, Zene admitted that before producing this check to Jennifer, she had "whited-out" the original description line, and replaced it with the words "deposit return cleaners." Moreover, Zene admitted that before producing a copy of the $25,000.00 check (after she got it back from the Bank), she had also attempted to change the payee line from "David P. Hoult" to "David Hahn."¹²

12 Zene's explanation was as follows:

I had a client that I thought then — when I talked to my accountant — she would recognize because I had had an offer. And his name was David Hahn (ph.). I wouldn't have to deal with my accountant on it. And then I decided I better not do that."

She further stated, in response to a question "you also whited out something else on the check, though, right?", that:

The whole thing. The description too. I had it under Stoughton Real Estate and this other man — I mean, Stoughton Dry Cleaning. The other David Hahn wanted to by a Concord business. So I put it under Concord Dry Cleaning. And that's when I decided to put it back again."

I find that "but for" the fact of Jennifer's lawsuit against David, the transactions with respect to the $25,000.00 check would not have taken place as they had.

Specifically, I find David's first attempt to conceal this distribution may be inferred from his letter to the Bank's Attorney to send the distribution directly to Zene and her ABB account. This attempt failed because Attorney Stanfied recognized that the distribution had not been "assigned" and thus directed the Bank to make the check payable to David but to send the check to ABB as David directed. Thus, David was unable to get the payment made directly to Zene/ABB and he had to sign the check himself. However, he tried again to conceal the money by endorsing the check to Zene to put in her business account. In order to make tracing the funds even more difficult, he then had Zene give him a check for $25,000.00 and then endorsed it over to Grace for safekeeping. His last attempt to conceal the distribution was to deny to Jennifer having any knowledge that he was the beneficiary of any inheritance.¹³ Once Jennifer learned of the distribution, David and Zene fabricated stories to explain why the monies did not really belong to David but to someone else — his brother, Charles. The inconsistent and conflicting explanations about why the money was transferred to Zene and then back to David and then to Grace reinforce the finding that David intentionally tried to conceal the $25,000.00 distribution from Jennifer and her collection efforts.

13 I find David's claim that he did not understand what he was inheriting or how he was inheriting to be unpersuasive and controverted by the documentary evidence, especially the various letters to the Bank with instructions about the distributions. These demonstrate a level of sophistication with respect to financial matters. I also factor in David's prior financial transactions with respect to real estate, his education and his background as a researcher at the Massachusetts Institute of Technology (MIT), his invention of patents, and the fact that he ran his own consulting business, Hoult Co.

There is simply no plausible explanation why David did not just endorse the check over to Charles if, as David suggested, the money actually belonged to his brother pursuant to a prior agreement. The explanation that he did not know what to do with it or that he gave it to Grace for safekeeping, defies logic. David's alternative argument, i.e., that Charles said he could keep the money as a loan for legal fees, is also not credible and contradicts his own testimony that Charles had called him to remind him of their prior agreement and that therefore the distribution belonged to him. Even if that were true, there is still no plausible explanation why David gave the money to Grace. Further, it is noteworthy that David has been unable to present any written documentation evidencing any loan by Charles to David; and yet, there is a purported written agreement between Charles and David with respect to the farmland. Moreover, Zene's inconsistent positions support the contention that the stories are fabricated. First, she stated she thought Charles had loaned David the funds for legal fees and now claims the monies were owed to Grace as part of a set-off. I find that both Zene and Grace's alternative explanations and their actions demonstrate a consciousness of guilt in this scheme as well, and I reject Zene and Grace's contention that Grace is entitled to a set-off. I view this as a recent contrivance. At trial, Grace Cuddy did not claim an ownership interest in the funds. This was not a situation where the transfer resulted merely in a preference of one creditor over another.

I further find that Zene's denial of having any knowledge of any inheritance distributions was done in an attempt to protect David and to prevent Jennifer from discovering information regarding the inheritance distributions and to keep the assets beyond the reach of Jennifer.

Finally, I find that Zene's actions in "whiting-out" the memoranda portion of the $25,000.00 check she gave back to David and her attempt to "white-out" the name of the payee (to replace David Hoult with David Hahn) and her recognition that she "better not do that" evidences a guilty state of mind with respect to engaging in a fraud to cover up David's inheritance. I reject Zene's explanation of a business motive for the attempted altering of the check. Rather, I accept the proposition that Zene thought better of the "white-out" idea once she realized the check had been processed by the bank and thus the actual terms of the check would be reflected in the bank records and would ultimately be discoverable by Jennifer.

I conclude Jennifer has demonstrated, by clear and convincing evidence, that David, with the active and knowing participation of Zene and of Grace, engaged in a scheme to hinder, delay and defraud Jennifer, in an effort to place the $25,000 in inheritance funds beyond Jennifer's reach.

2. Count XIV: Transfer of $52,000.00

On or about August 28, 1993, in connection with a second distribution of inheritance, David once again wrote to the Bank's attorney, James Stanfield. At this time, he requested that his share of the farmland sale proceeds be assigned to his brother Charles, pursuant to an agreement (the "Assignment"), a copy of which was attached to the letter. The authenticity of the Assignment has been successfully challenged by Jennifer.

A review of the document shows that the Assignment was purportedly signed by Charles on January 25, 1977 and by David on January 28, 1977. The Assignment provides:

This Agreement provides for all consideration for Charles P. Hoult's agreement to the conveyance to David P. Hoult of the farmland held in Monroe Ave. Trust 11021-02 (for the benefit of Charles P. Hoult). In addition to the payment of $1.00 to Charles P. Hoult, David P. Hoult hereby assigns to Charles P. Hoult his interest in any future sale of the farmland held in the Monroe Ave. Trust 11021-01 (for the benefit of Warren J. Hoult). In the event that Charles P. Hoult predeceases Warren J. Hoult, David P. Hoult further agrees to assign his interest in any future sales of the farmland held in Monroe Ave. Trust 11021-01 to the Estate of Charles P. Hoult.

Following David's directive to Attorney Stanfield, in the fall of 1993, a distribution of $52,691.52 was made to Charles Hoult. Thereafter, Charles's wife began to pay David's attorneys' fees.

At trial, David testified that he believed his brother Charles was entitled to his share of the farmland sale distributions, pursuant to this Assignment that David claimed to have made with Charles in 1977, for Charles's interest in the farmland held in the Monroe Avenue Trust. In his deposition of September 1, 1994, David testified that the Assignment had been executed in 1977, and held out the document to be a copy of the original Assignment. The existence of this Assignment was not disclosed to Jennifer until David's deposition in 1994. At that time David had claimed the first distribution of $25,000.00 belonged to Charles because of the Assignment.

After this deposition, Jennifer's lawyers deposed the Bank's lawyer, James Stanfield, and the Bank's Vice President/trust officer, William Dennis, and learned that the Bank had concerns about the Assignment, and about David's directives to the bank to have the Distribution paid to Charles. Vice President Dennis testified at his deposition that he had never heard of, nor seen, the Assignment before August 1993. He first learned of this when David issued his letter "Directive" dated August 30, 1993, which included a copy of the Assignment with it.

Dennis had other concerns about the Assignment, because the Bank, as trustee of the Charles Trust, was aware of a different and separate agreement between David and Charles, for farmland, and the Assignment appeared to him to be at odds with that agreement. Specifically, the Bank knew that in 1977 David was paying Charles $1500.00 per acre for Charles's interest in farmland, because on January 26, 1977 Charles had written a letter to the Bank directing that it convey his interest to David at the $1500.00 per acre rate. Because the Charles Trust was a spendthrift trust, the Bank's approval was needed for this deal to be consummated, and the Bank did get Court approval of the $1500.00 per acre deal. However, the 1977 Assignment purported by its terms, to embody all consideration for the transfer. This apparent conflict and the Bank's lack of knowledge of the Assignment until 1993 led Dennis to believe that the Assignment was "stale information."

As a result of these factors, a legal opinion was sought from Attorney Stanfield, as to whether the spendthrift provisions applied to the remainder interest of the Warren Jacks Trust (i.e. whether Charles had the right to assign his interest in the farmland to David), and also requesting a determination on the wording of the Assignment, which provided for all consideration. At a deposition of Attorney Stanfield taken on September 16, 1994, Stanfield testified that he had no recollection of any opinion letter he wrote, or any conversations regarding the Assignment.

David testified that the Assignment was created because he paid less than the full market value for the 80 acres he purchased from Charles. Additionally, David stated that his brother needed money because he was going through a divorce, so David agreed to give Charles any further distributions.

Prior to the fraudulent conveyance trial, and because of certain suspicions concerning the validity/authenticity of the Assignment which David produced, Jennifer requested that David produce the original Assignment, so that the signatures could be ink-dated/analyzed further. It was only upon this request that it was then discovered that the Assignment produced by David was not the original, purportedly executed in 1977, but was a duplicate that David and Charles "re-executed" in 1993, and back-dated to appear to have been executed in 1977. This fact was disclosed to Jennifer's counsel by David's attorney, Jordan Shapiro, in a letter dated November 15, 1995.¹⁴ Additionally, at trial, David testified that the Assignment was actually signed by Charles and him in the spring of 1993, after his brother realized that he could not find the original document, and, at that time, they dated the document as of January 1977 because that was the date the original was signed. David's explanation for his contradictory testimony concerning the date the Assignment had been executed was that: "I guess at the time it didn't seem important to me."

14 The letter states, in relevant part:

I am informed by my client that the original was probably mailed to Attorney Stanfield by Charles Hoult, or it may have been lost or misplaced. In any event, I am further informed by my client that Charles located an unsigned duplicate of the original 1977 assignment. When it became obvious that the document was important and when no one could find the original in the 90's sometime, my client and Charles re-executed the duplicate original. Thus, I expect that you will find that this Assignment document is old, while the signatures are newer.

David's recantation of his prior false testimony regarding the authenticity of the Assignment, coupled with the Bank's lack of knowledge of this Assignment until 1993, when considered in light of timing and circumstances of the trust distributions, satisfy me that the 1977 Assignment between David and Charles is a sham and a recent fabrication by David and Charles, in order to get the Bank to send David's share of the trust distribution directly to Charles, and to provide a pretext to claim that other distributions actually belonged to Charles as well. The purpose of this contrivance was to conceal substantial amounts of David's assets which Jennifer could have used partially to satisfy her judgment. I also find significant the fact that, with respect to the first distribution of $25,000.00, David had attempted to route the money to Zene directly, but — because David had not expressly "assigned" the distribution — the Bank made the check payable to Daved, although sent it to Zene/ABB. Thus, David realized that in order to get the payment made directly to someone else, he would have to tell the Bank that the distribution had in fact been "assigned," and that the "assignment" would have to be in writing to satisfy the Bank. This resulted in the purported "re-executed" Assignment between Charles and David.

I conclude that Jennifer has proven, by clear and convincing evidence, that the Assignment between David and Charles was fabricated by them, knowingly, and with an actual intent to conceal the approximately $52,000.00 inheritance distribution from Jennifer, to prevent her from collecting on the Judgment.

3. Count VI: Transfer of $8,916.93

In or around November 17, 1993, a check was issued from the Bank to David in the amount of $8,916.93, as the one-third share of the full and final balance of the Monroe Avenue/Jack Hoult trust distributions. David claims the money comprised the proceeds for the sale of farmland, and therefore was covered under the Assignment with Charles. There is an ambiguity whether this $8,916.93 distribution was David's share for the sale of the farmland or whether this money was from stock liquidation (and thus could not be part of the monies owed to Charles from the Assignment discussed supra). However, the Bank took the position that the Assignment referred only to the sale of farmland so the check was made payable to David directly. As with the first distribution, David endorsed this check to Zene, who then deposited it in her ABB account.

For the same reasons set forth more fully above, I conclude that David's transfer of the funds to Zene for placement in her business account constitutes a fraudulent conveyance, with actual intent to conceal assets from Jennifer. I find Zene's acceptance of the check and deposit into her business account to have been done knowingly by Zene actively to assist in David's efforts to conceal this distribution.

In this connection, I reject the defendants' contentions that additional evidence is required regarding the effect of the Court's restraining Orders for a determination of whether the funds were used for legitimate business and living expenses as authorized by the orders. Given the totality of the circumstances and the findings and conclusions made with respect to the other two inheritance transactions, I find that the Defendants David and Zene engaged in a pattern of behavior specifically designed to prevent Jennifer from using the inheritance distribution to satisfy her judgment. I note that Zene conceded that it was not her regular practice to keep such monies in the ABB escrow account. At trial, Zene testified that she did not want to keep money in the ABB escrow account because: "It's an escrow account and I can only keep money in there for so long. And I have to be able to show the offers and purchase and sale. Otherwise, it goes back to the person who puts the offer in." The inheritance proceeds were clearly not connected to any purchase and sale agreement, and there has been no plausible explanation offered by David or Zene why the funds were transferred to Zene's business account other than for purposes of fraudulent conveyance and concealment. If the money was to be used for David and Zene's ordinary living expenses, then the money should have been transferred into their existing household account, which she maintained at BayBank Middlesex.¹⁵

15 I note the paradox presented in David's testimony that Zene suffers from dyslexia, which causes her to confuse accounts and confuse numbers. Logically, one would assume that someone who has substantial difficulty with bank accounts and numbers would try to simplify banking practices by either reducing the number of transfers in and out of accounts and/or by keeping accounts completely separate for specific purposes, be it for business or household expenses. However, in this case, Zene has done the complete opposite: transferring checks in and out of various accounts, opening a number of different accounts with different banks and generally commingling funds with her business account, personal accounts and joint accounts.

D. Counts VII and XVI: Refund Checks

1. Count VII: 1993 Tax Refund Check for $19,408

In 1994, after the jury verdict in the underlying action, David received a tax refund for the year 1993 in the amount of $19,408.00. David endorsed the check over to Zene. David claims the funds were used for ordinary household expenses permissible under the terms of the Restraining Order. I find the funds were actually deposited in a BayBank account which Zene and Grace held jointly. I reject the contention that the refund should be considered to have arisen from losses sustained by Zene in her business and that the entire refund should be allocated to Zene.

Jennifer claims one half of the $19,408.00 refund ($9,704.00) attributable to David's share was fraudulently conveyed to Zene and Grace.

I conclude that Jennifer has established by clear and convincing evidence that the transfer of David's 50% interest in the 1993 tax refund was a fraudulent conveyance. I conclude that Zene and Grace knowingly and intentionally participated in the fraudulent transfer in an effort to help David conceal his assets from Jennifer, and consequently both Zene and Grace, as knowing transferees, are jointly and severally liable for the diversion of the monies.

2. Count XVI: 1994 Tax Refund of $14,961.00

In 1995 David received a tax refund for the tax year 1994, in the amount of $14,961.00. David then endorsed the check to Zene. Again, as in Count VII, David claimed the money was used for ordinary living expenses and business expenses and for upkeep of the properties.

Based on the totality of circumstances, I find this to be part of the pattern by David and Zene to conceal assets from Jennifer. I conclude Jennifer has established by clear and convincing evidence that the conveyance of David's 50% interest in the refund, or $7,480.50, to be a fraudulent conveyance. I further conclude that Zene participated in that fraudulent conveyance knowingly and intentionally in an effort to assist David in fraudulently concealing his assets from Jennifer.

E. Count VIII: Transfer of $25,328.35 from David Hoult's Personal Funds and Hoult Co. Funds

In July 1993, immediately following the verdict in the underlying action, David closed all his personal bank accounts, as well as the bank accounts of his business, Hoult Co., a consulting business that he operated from his home. David was the sole owner of Hoult Co. and there were no other investors in the company.

The company maintained checking and capital bank accounts at BayBank, and an account at Sterling Bank. The funds from these accounts totaled $25,328.35, and David admitted at trial that he had transferred the funds to Zene. Specifically, David closed out an account with the Sterling Bank (#9000200061) and withdrew ("closed it out with cash") $9,178.35. He also closed out the BayBank checking account (#6773338), of Hoult Co., in the amount of $11,907.92 in cash. From the BayBank capital account, David took out $4,242.08 (#5286328) in cash.

At trial David testified he gave over $12,500.00 to Attorney Zizik, and the balance to Zene Hoult, for household expenses. However, in an Affidavit previously filed, David stated that he gave $7,500.00 (not $12,500) to Attorney Zizik. At trial, David also claimed that part of the money was used to get a transcript of the trial, for use on appeal, however, he failed to specify the cost for this purported expense both in his Affidavit and in his deposition.

Moreover, Zene, in her Affidavit, admitted that David had given her money from the Hoult Co. account, which she then deposited in an account she opened at the Auburndale Cooperative Bank. Zene claimed that from those funds, she used $7,500.00 to pay David's legal fees to Attorney Zizik. No mention was made about the funds being used for transcript costs.

There are pervasive inconsistencies in both David and Zene's stories with respect to this money. First, David testified at trial he gave $12,500.00 to Attorney Zizik out of those bank funds, and then gave the balance to Zene. However, he had previously stated in his Affidavit that $7,500.00 was given to Attorney Zizik. Contrary to David's testimony, Zene stated in her Affidavit that David had given her only $9,242.08 from the closed Hoult Co. bank accounts, and from that money (which she deposited at the Auburndale Cooperative Bank) she was the one who paid $7,500.00 to pay the legal fees to Attorney Zizik. No mention is made where the other $16,086.27 went.¹⁶ In closing argument, counsel for Zene conceded that Zene did not contest that she received $25,328.35.

16

$25,328.35 — total from accounts — 9,242.08 — Zene claims David gave to her

$16,086.27

Based on the foregoing, I find both David's and Zene's testimony to be incredible. I do not credit the assertion that almost half of the monies from the accounts were given to David's lawyer and the balance used for household expenses. Given the timing of these transactions — immediately following the verdict — the transfer of the funds to Zene and Zene's acceptance of the funds, and the discrepancies as to the way the funds were expended, combined with the totality of the circumstances surrounding the several transfers of funds between David and Zene, I conclude Jennifer has established by clear and convincing evidence that the transfers of $25,382.35 were made with actual intent to conceal David's assets from Jennifer in order to hinder her collection of the judgment.

F. Count IX: Transfer of the $1500 Castrol Check

In November 1993, after the jury verdict in the tort case, David transferred a $1500 check which was received from Castrol, Inc. (the "Castrol check"), to Zene. Zene then transferred the money to her Athans Business Brokers (ABB) account. This November 1993 Castrol check constituted payment of an outstanding receivable owed David's business, Hoult Co.

In the course of discovery in this litigation, David was asked whether Hoult Co. had any receivables as of August 1993, and David denied having any. When he was confronted with the Castrol check at trial, he conceded it represented payment for one.

Zene admitted that she deposited the Castrol check in the BayBank ABB account¹⁷ because all the Hoult Co. bank accounts had been closed out. She also testified that she later withdrew some of the funds and deposited the money into her own personal savings account.

17 Zene deposited both the $8,916.93 inheritance check from the Edgar County Bank and Trust (previously discussed), along with the $1500 Castrol check, for a total deposit of $10,416.93.

I conclude that Jennifer has established by clear and convincing evidence that this transfer of the $1500.00 Castrol check from David to Zene, and the deposit in Zene's ABB account constituted a fraudulent conveyance by David for which Zene was a knowing and intentional participant and is jointly and severally liable. I consider as highly probative the fact that David denied any receivables of the company as of August 1993. Additionally, I do not credit that at the time the transfer was made the money was intended to be used for ordinary household expenses. The fact that Zene deposited it into her business account again belies that contention. Moreover, as previously discussed, Zene testified that she did not like to keep monies in her ABB account. The fact that Zene then transferred the money into her personal account bolsters Jennifer's contention that David and Zene were attempting to launder the funds to various accounts in order fraudulently to conceal them from her.

G. Counts XI and XII: Closing of Joint Accounts:

1. Count XI: $5,231.87

After the verdict, on or about July 2, 1993, Zene withdrew $5,231.87 from David and Zene's joint household account at Baybank Middlesex (account No. 11584187). This was the entire balance of the account, which was effectively closed out. David and Zene were the authorized signatories on that account, although Zene claimed that those funds "were available to me for payments as solely I determined."

David and Zene claim that the monies from this account represented, in part, the amount of money David had previously given to Zene to pay ordinary living expenses pursuant to their agreement. Shortly thereafter, Zene deposited these funds into an account at BayBank Middlesex, (account No. 34987335) held in Zene and Grace's name. Zene claims the funds were subsequently used for ordinary living expenses of David, Grace, and herself. Jennifer claims the transfer of David's 50% interest to an account in which David was not a signatory constituted a fraudulent transfer with an actual intent to hinder, delay, and defraud Jennifer.

I reject defendants citation to In re Rauh, 164 B.R. 419, 424 (Bankr.D.Mass. 1994), for the proposition that in this context the contents of the joint checking accounts are presumed to belong to Zene, as one of the joint tenants, and that therefore her withdrawal of the funds cannot constitute a transfer by David as a matter of law.¹⁸

18 I note that as a defense to the withdrawal on the household account (held jointly) Zene makes the claim that the contents of the joint checking accounts are presumed to belong to her as one of the joint tenants and thus her withdrawal of the funds cannot constitute a transfer by David as a matter of law. However, with respect to the investment account (See Count XII infra) also a joint account, Zene takes the contrary position that David cannot have any interest in that account.

I conclude on the basis of the facts and circumstances before me that Jennifer has established by clear and convincing evidence that this transaction was part of a broader scheme by David and Zene fraudulently to convey David's assets to hinder collection of the judgment by Jennifer. It is not disputed that the funds in the joint account came at least in part from David at a proportion I find to be 50 percent. If, as claimed, the money was to be used to pay ordinary household expenses, there would have been no reason for Zene to have withdrawn the funds from the joint household account in the first place, especially considering that Zene stated that she already had complete access to that account, and could use those funds as she decided. In light of the circumstances and timing the purpose was to insulate these monies from Jennifer's collection efforts.

2. Count XII: $4,242.99

On or about July 15, 1993, Zene closed another account, held jointly with David, at BayBank. The funds from this account were then deposited by Zene into the Middlesex Savings Bank Account, No. 223138747, in Zene's name only, which Zene claims was a new Investment Account. Jennifer claims David transferred his 50% interest in the funds to Zene, and Zene accepted the transfer, both with the actual intent to defraud Jennifer. Unlike the scenario in Count XI, David does not appear to have substantially contributed to this account. The account was in existence prior to David and Zene's marriage and was originally intended as an investment account, which Zene maintained after acquiring the East Main Street property. She used the account for depositing tenant security deposits, last month's rent, and rental checks for each of the four rental properties she acquired. From this account Zene paid for the mortgage, repairs, taxes, improvements and expenses relating to the investment properties.

Initially, Zene held the account in her name prior to her marriage to David, with only Zene and her mother, Grace, as the authorized signatories. Zene claims that after David transferred a 50% interest in the East Main Street Realty Trust, David's name was substituted for Grace's on the account. Zene denied any intention to maintain the account in trust for David, and contends that after 1991, she held the account as a special account, making virtually all the deposits and withdrawals on the account and maintaining all the records of the account. Zene alleges that David was never informed about the status of the account or any transactions relating to it.

Zene claims to have withdrawn $4,334.36¹⁹ which consisted of "tenant security deposits, last month's rents and working capital." Zene then took that money and deposited it in a new Middlesex Savings Account (#22318747) in her name alone, "in order to secure the funds which I held in trust for my tenants and for emergency repairs and expenses. David Hoult was not consulted with respect to the transfer . . ."

19 There is a modest discrepancy in the amount alleged to have been withdrawn.

In light of 1) Zene's plausible non-fraudulent purported purpose for the transfer with respect to Count XII (i.e. to protect funds Zene held in trust for her tenants); 2) the existence of the account prior to the marriage; 3) the nature of the account (investment, as opposed to household, account); 4) the origin of the funds (rental checks, security deposits, as opposed to contributions from David); and 5) David's lack of involvement with the account, I find that Jennifer has not met her burden of proving this transaction was made by David or on behalf of David with an actual intent to defraud Jennifer and hinder her collection efforts from David's assets.

H. Count XIII: The Motor Yacht

Jennifer claims that David and Zene jointly purchased a $50,000 motor yacht in 1991. Title to the boat, however, was taken in Zene's name only. Jennifer claims that David actually paid all costs, including survey costs, insurance, taxes, expenses, storage, marina fees, and maintenance costs, and that this evidences a "side-agreement" with Zene to hold title, in order to prevent Jennifer from attaching the boat in the event a judgment was rendered against him in the underlying action. David admits paying "some" of the expenses relating to engine expenses and storage fees but denies any ownership interest in the boat, and denies any fraudulent side-agreement. David also contends that, as a matter of law, Jennifer cannot recover on this claim, since there has been no "transfer" within the meaning of Mass. Gen. Laws ch. 109A.

I find as follows:

In April 1991, David and Zene both signed a purchase and sale agreement with Salem Five Cent Savings Bank, for the purchase of a 1978 Neptunas Motor Yacht. The purchase price was originally $70,000; however, after the boat had been surveyed, David re-negotiated the purchase price to $50,000.

In addition to negotiating the purchase price, David made other contributions, both monetary and non-monetary, in connection with the motor yacht. First, he contributed to the purchase price. He testified that the boat was paid for on a credit line on a piece of real estate (9 Heard Road), under which both he and Zene were liable. Second, he paid the broker's fees in connection with the purchase and sale, from his business account. The sale of the boat was brokered by Yankee Marine and David admitted that he wrote an $8000 check to Yankee Marine from his capital account, on May 1, 1991. In addition to the broker's fee, David also paid a $2500.00 Sales Tax to the Commonwealth of Massachusetts, on May 27, 1991. The funds for the taxes also came out of the Hoult Co. capital account.

The boat was purchased in May or June of 1991, and David continued to make a number of payments. David and Zene concede that David paid "some" expenses relating to his engine experiments and storage fees. Zene originally testified that the only contribution David made to the boat was that "he would fix it from time to time." However, later at trial she refined her testimony to state that David would pay expenses relating to his engine work. Upon confrontation during her examination, she further conceded that David also paid storage fees.

David testified that he paid expenses relating to the yacht because he was using the boat for his work in developing a piston pack for sale. He claimed he wanted to determine whether the piston ring on which he had a patent was in marketable condition, but at some point determined that it was not, so he then assigned his rights to the patent to MIT. David contends that, in consideration of his being permitted to experiment with the engine of the boat, and for use of the boat for testing purposes for his business, he agreed to pay "some" expenses associated with the boat.

A review of the payments made however, indicates that David and Zene have significantly understated David's financial contributions. In fact, David's involvement with the boat was pervasive. At trial, when confronted about these payments, David admitted that he paid several other expenses relating to the boat, most from his Hoult Co., Inc. accounts.²⁰ These included $100.00 on June 4, 1991 and $2,632.00 on June 20, 1991, for marina expenses. David also paid for at least part of the boat insurance. On July 3, 1991, David paid Yankee Marine $2500.00 and on July 19, 1991, David paid Enos Marine $1067.50, again from his business's capital account. On July 18, 1991 David paid $1780.00 to Yankee Marine from his capital account. Other payments included: $500.00 to Enos Marine from his Baybank account, on March 14, 1992; another $500.00 to Enos Marine on May 8, 1992; $200.00 to Yankee Marine on May 6, 1992; and $600.00 to Cara Island Marine on April 30, 1993.

20 Before the verdict in the underlying action, David made payments from the Hoult Co., Inc. accounts. After the verdict, Zene made the payments.

Despite David's contributions, David and Zene maintain that David has no right, title, or ownership interest in the motor yacht and was not obligated to make payments on the yacht. They contend that Zene alone owns the yacht. The only relevant documents relied upon by the parties which relate to determination of ownership are the Purchase and Sale Agreement, the Bill of Sale, and the Certificate of Payment of taxes. Jennifer bases her contention that David and Zene took title jointly upon the Purchase and Sale Agreement, which lists both of them as buyers. On the other hand, David and Zene rely on the "Bill of Sale" of April 28, 1991, which lists only Zene as the owner, as well as the Certificate of Payment by the Commonwealth of Massachusetts Department of Revenue, which also lists Zene as the sole owner.

I do not find the documentation submitted to be dispositive on the issue of ownership of the boat. Other than Zene's joint liability on the credit line there is no evidence that Zene made any financial contributions toward or in connection with, the boat, except that after judgment in the underlying action, Zene made payments for the boat from the Auburndale Bank account that she opened in her name, and which was funded, at least in part, from funds David signed over to her. There is no evidence that the yacht was purchased for any purpose but for David to be able to conduct his experiments for business purposes and for their joint pleasure. The fact that David was also liable on the credit line used to purchase the boat initially, and the fact that the Purchase and Sale Agreement contains both David and Zene as Buyers is highly probative of their intent, at the time of purchase, that David would have an ownership interest in the motor yacht. More important, however, is the fact that David's contributions were not merely for engine expenses and storage fees, as David and Zene initially claimed. He also contributed in negotiating the purchase price, arranging and paying for the survey, and paying for maintenance and marina fees, taxes and at least part of the boat insurance. In less than a 2 year period, these contributions totaled more than $22,000.00 on a $50,000.00 boat. Thus, the fact that Zene may have taken title in her name alone merely reinforces the strong inference that this was simply another dimension to the scheme David and Zene embarked upon fraudulently to conceal David's assets from any possible judgment Jennifer might obtain against him. In this connection, I also consider probative the fact that Zene and David attempted to conceal the extent of David's contributions to maintenance, repairs and storage for the boat.

As a technical defense, David and Zene contend that Jennifer cannot prevail on this Count as a matter of law, because there is no "conveyance" of the boat, within the meaning of the fraudulent conveyance pursuant to Mass. Gen. Laws ch. 109A. Jennifer, in response, contends that there was an implied "transfer" which occurred when the original Purchase and Sale agreement in which they were both identified (and which conferred rights to take title upon payment) was converted to an agreement whereby only Zene would take title. Jennifer contends there was a transaction between the time of the Purchase and Sale agreement to the time of the actual sales documents to Zene, and that this transaction was fraudulent. As an alternative position, Jennifer seeks an imposition of a constructive or resulting trust.

On the state of the evidence before me, it is a considerable strain to find a conveyance of the boat within the meaning of Mass. Gen. Laws ch. 109A. I conclude rather that Jennifer's request for this Court to impose a constructive trust is appropriate under the circumstances. This equitable remedy will permit an order of conveyance of title in the yacht, which could then be used in part to satisfy her Judgment. Alternatively, a constructive trust may be imposed with respect to any funds representing the proceeds of any sale of the motor yacht.

A "resulting trust" "typically arises when a transfer of property is made to one person and the purchase price is paid by another; in such a case a trust results in favor of the person who furnished the consideration." Meskell v. Meskell, 355 Mass. 148, 150-51 (1969). See also Ryan v. Brodak, 1999 WL 672426, 4 (Mass.Super.).

A "constructive trust" is "a traditional equitable remedy for the prevention of unjust enrichment by means of fraud or breach of trust." Aubuchon v. Howort, 1998 WL 1182245, 4 (Mass.Super.) citing Scovil v. Matucci, 19 Mass. App. Ct. 976, 977 (1985). A constructive trust may be imposed even in the absence of any intention by the parties to create a trust, in order to avoid unjust enrichment of one party at the expense of another, in circumstances where legal title to the property is obtained by fraud, violation of a fiduciary relationship, or where confidential information is acquired and then advantageously used to the detriment of another. Barry v. Covich, 332 Mass. 338, 342-43 (1955); see also Kelly v. Kelly, 358 Mass. 154, 156 (1970). "Under Massachusetts law, a court will declare one party a constructive trustee of property for the benefit of another if he acquired the property through fraud, mistake, breach of fiduciary duty, or in other circumstances indicating that he would be unjustly enriched at the other's expense." Fink v. LaSelva, 1999 WL 26900, 7 (Mass.Super.) citing Kelly, 358 Mass. at 156 (1970); see also Nile v. First N.H. Investment Services Corp., et al., 1998 WL 1181262, 6 (Mass.Super.) (equitable remedy of constructive trust does not depend on intention of parties to create trust), Fortin v. Roman Catholic Bishop of Worcester, 416 Mass. 781, 789 (1994); Nessralla v. Peck, 403 Mass. 757 (1989).

In this case, no fiduciary relationship exists between the plaintiff and the defendants in connection with the motor yacht. Consequently, Jennifer must prove fraud occurred at the time legal title to the property was obtained. See Meskell, 355 Mass. at 151 (fraud must occur at time property was transferred), Kelly, 358 Mass. at 156. On the basis of the evidence presented, I conclude that Jennifer has proven by clear and convincing evidence that David and Zene participated in a fraudulent scheme to conceal David's assets by having Zene take title to the motor yacht in her name solely. I will impose a constructive trust only with respect to David's interest, which I determine to be one half the value of the vessel. I will consider a request for an Order that the yacht be sold, and that 50% of the proceeds shall be used for partial satisfaction of Jennifer's judgment.

IV. CONCLUSION

Based on the foregoing, it is hereby ORDERED that a Judgment shall enter as follows:

Judgment for the Defendants David Parks Hoult and Zene Athans Hoult individually and as Trustee of the Lake

Realty Trust and the LaSalle Realty Trust, against the Plaintiff Jennifer Hoult, on Counts I, II, III and IV;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult, Zene Athans Hoult, Athans Business Brokers, and the Estate of Grace E. Cuddy, jointly and severally, in the amount of $25,000 on Count V plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult, Zene Athans Hoult, and Athans Business Brokers, jointly and severally, in the amount of $8,916.93 on Count VI plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult, Zene Athans Hoult, and the Estate of Grace E. Cuddy, jointly and severally, in the amount of $9,704.00 on Count VII plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult and Zene Athans Hoult, jointly and severally, in the amount of $25,328.35 on Count VIII plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult, Zene Athans Hoult, and Athans Business Brokers, jointly and severally, in the amount of $1,500.00 on Count IX plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult and Zene Athans Hoult, jointly and severally, in the amount of $2,615.93 on Count XI plus interest and costs as provided by law;

Judgment for the Defendants David Parks Hoult and Zene Athans Hoult against the Plaintiff Jennifer Hoult, on Count XII plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult and Zene Athans Hoult, jointly and severally, to the extent that a trust is recognized and imposed, in the amount of 50% of the value of the motor yacht on Count XIII;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult, Zene Athans Hoult, and Athans Business Brokers, jointly and severally, in the amount of $52,691.52 on Count XIV plus interest and costs as provided by law;

Judgment for Plaintiff Jennifer Hoult against the Defendants David Parks Hoult and Zene Athans Hoult, jointly and severally, in the amount of $7,480.50 on Count XVI, plus interest and costs as provided by law.

All remaining issues are reserved pending further proceedings, as structured in accordance with the Procedural Order issued this date.